Local Property Tax Reform and Municipality Spending Efficiency

Afonso, António; Venâncio, Ana

doi:10.2139/ssrn.4020689

Download This Paper

Open PDF in Browser

Add Paper to My Library

Local Property Tax Reform and Municipality Spending Efficiency

CESifo Working Paper No. 9538

37 Pages Posted: 31 Jan 2022

See all articles by António Afonso

António Afonso

University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics); ISEG Lisbon School of Economics and Management,Universidade de Lisboa; REM - Research in Economics and Mathematics

Ana Venâncio

ISEG Lisbon School of Economics and Management,Universidade de Lisboa

There are 2 versions of this paper

Date Written: 2022

Abstract

We investigate the effect on municipality spending efficiency of a local property tax reform, which reduced in 2008 the upper limit of the property tax. We compute municipality efficiency scores via data Envelopment Analysis (DEA) from 2005 to 2011, and then we rely in a panel data set to estimate how the tax reform affected the efficiency scores. Results of the analysis show that average input efficiency scores declined from 0.575 before the tax reform to 0.488 after the tax reform. This change was transversal to municipalities that reduced the municipal property tax (IMI) and to the ones that maintained the tax rate. In addition, the IMI reform is linked to higher efficiency scores. In other words, the reduction in efficiency ends up being smaller for the municipalities that decreased the IMI tax rate.

Keywords: public spending efficiency, local government, data envelopment analysis (DEA), local property tax reform

JEL Classification: C140, C230, H110, H210, H500

Suggested Citation: Suggested Citation

Afonso, António and Venâncio, Ana, Local Property Tax Reform and Municipality Spending Efficiency (2022). CESifo Working Paper No. 9538, Available at SSRN: https://ssrn.com/abstract=4020689 or http://dx.doi.org/10.2139/ssrn.4020689